Circuit Court Ordered to Enforce Option-to-Purchase Provision in Commercial Real Estate Lease

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District II of the Wisconsin Court of Appeals recently remanded a commercial lease dispute back to the Waukesha County Circuit Court, directing the court to enforce the parties’ agreed-upon option-to-purchase provision as written.  See Headstart Building, LLC v. National Centers for Learning Excellence, Inc., No. 2016AP434 (Wis. Ct. App. Nov. 8, 2017).

The dispute originated from a 2002 commercial lease in which Headstart Building, Inc. (“Headstart”) agreed to lease real estate property in Waukesha to National Centers for Learning Excellence, Inc. (“NCLE”).  Id. ¶ 5.  The lease included a provision allowing NCLE to invoke an option to purchase the property at any time.  The following language in the option-to-purchase provision is the focus of the parties’ dispute:

In the event Tenant shall elect to exercise Tenant’s option to purchase the Premises, Landlord and Tenant shall each choose an appraiser to appraise the Premises which appraisals must be completed within forty-five (45) days of the date Tenant notifies Landlord that it intends to exercise its option to purchase.  In the event the fair market value of the Premises in the two appraisals differs by no more than five percent (5%), the Appraised Value shall be the average of the two appraisals.  In the event the appraised value of the Premises in the two appraisals differs by more than five percent (5%), the two appraisers shall agree upon a third appraiser and the result of such third appraisal shall be the Appraised Value.

Id. ¶ 6.

In December 2012, NCLE invoked its right to purchase the property, and the two parties commissioned their respective appraisals.  Headstart’s appraiser valued the property at $6.88 million dollars while NCLE’s appraiser issued a $4.075 million valuation.  Upon comparing the two appraisals, it became clear that the cause of such a wide discrepancy was the differing methodologies employed by the appraisers.  Headstart’s appraiser determined the fair market value with consideration of the current NCLE lease encumbrance, while NCLE’s appraiser calculated the fair market value of the property free and clear of the current lease.  Id. ¶¶ 7-8.

Rather than following the terms of the option-to-purchase provision and have their respective appraisers seek a third party to resolve the conflict, the parties instead engaged in written correspondence disputing the proper methodology to calculate the fair market value of the property.  Once those communications broke down, Headstart filed suit in Waukesha County Circuit Court requesting specific performance of the option-to-purchase (at $6.88 million) and damages arising from NCLE’s bad faith breach of the lease.  NCLE filed a declaratory judgment counterclaim, requesting the court to declare the proper appraisal methodology.  Id. ¶ 9.

After a two-day bench trial, Judge Haughney issued an oral ruling rejecting Headstart’s breach of contract and bad faith claims, though it was unclear from the record whether the grounds for the dismissal was based on Headstart’s failure to follow the option’s procedure of seeking a third appraisal or because the court concluded that the parties’ differing appraisal methodology positions represented a failure to reach a meeting of the minds, rendering the entire provision unenforceable.  Judge Haughney requested supplemental briefing regarding the fate of NCLE’s declaratory judgment counterclaim, and ultimately dismissed that claim as moot on the ground that the option provision was unenforceable and must be stricken from the lease in its entirety.  Id. ¶¶ 10-11.

After NCLE filed an appeal seeking to revive its declaratory judgment counterclaim, the Wisconsin Court of Appeals overruled the Circuit Court’s order striking the option from the lease.  Writing for the Court, Judge Hagerdorn noted that, while essential contractual terms (such as the purchase price in a real estate transaction) must be definite in order to be enforceable, it is well-settled under Wisconsin law that the terms need not be 100% certain so long as they are “capable of being ascertained from the agreement itself.”  Id. ¶ 17.  The Court referenced a long line of Wisconsin precedent upholding real property contracts setting a “fair market value” price to be determined by appraisement, and concluded that the parties’ dispute was one of differing interpretations of agreed-upon contractual terms.  Id. ¶¶ 17-22.   In conclusion, the Court found that the provision provided a simple, straightforward and definite means of determining the purchase price: either the average of the parties’ respective appraisals or, if the difference between those values was too great, the third appraised value of the property.  Id. ¶ 22.

Despite this conclusion, however, the Court found that substantive questions regarding the meaning of the option-to-purchase provision were not before it on appeal and remanded the case to the Circuit Court to address NCLE’s declaratory judgment counterclaim regarding whether the parties must appraise the property with consideration of the NCLE lease encumbrance.  Id. ¶¶ 24-25.  In a concurring opinion, Presiding Judge Reilly disagreed with these remand instructions, concluding that the proper methodology for determining the fair market value of commercial real estate is not a question of law for the courts to decide and that the provision here provides a dispute resolution procedure (i.e., a third appraisal) that should be enforced.  Id. ¶¶ 26-29.

While exercising restraint in only addressing the narrow question presented to it on appeal (whether NCLE’s declaratory judgment claim was properly dismissed), the Court of Appeals’ analysis leaves little doubt in the enforceability of the entirety of the parties’ option-to-purchase provision, including their agreed-upon means of resolving any valuation disputes through the use of a third appraiser.  It will be interesting to see if the Circuit Court follows the Court of Appeals’ lead on remand or instead elects to resolve the substance of the parties’ “fair market value” appraisal methodology dispute, which is one of first impression in Wisconsin.  See id. ¶ 24 n.7

U.S. Supreme Court Reiterates That Not All Procedural Time Limits Are Jurisdictional

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The U.S. Supreme Court’s first decision of the current term involves a suit alleging age and sex discrimination in the workplace. But the Court addressed only an important, though technical, issue about deadlines for appellate filings. Hamer v. Neighborhood Housing Services of Chicago, No. 16-658, was argued on October 10. The Supreme Court quickly turned around a unanimous decision on November 8, 2017, authored by Justice Ruth Bader Ginsburg.

Charlaine Hamer brought a federal lawsuit for employment discrimination. The trial court granted summary judgment in favor of the defendants. Under 28 U.S.C. 2107(a) and Federal Rule of Appellate Procedure 4(a)(1)(A), Ms. Hamer had 30 days from the entry of judgment to notice an appeal. But a few days before the 30-day deadline, Ms. Hamer’s attorneys sought both to withdraw from the case due to strategic differences with the client and requested a 60-day extension of the appeal deadline so that Ms. Hamer could find new counsel for her appeal. The trial court granted both motions. Represented by new counsel, Ms. Hamer filed her appeal shortly before the extended deadline.

The U.S. Court of Appeals for the Seventh Circuit, however, questioned whether it had jurisdiction over Ms. Hamer’s appeal and asked the parties to brief that issue. As the appellate court noted, Federal Rule of Appellate Procedure 4(a)(5)(C) limits extensions of time for noticing an appeal to no more than 30 days after the initial deadline. Federal statute—28 U.S.C. 2107(c)—also addresses extensions, but it does not set an outer limit for their length. Here, the district court had granted Ms. Hamer a 60-day extension.

The difference between the statutory text (which does not limit the length of an extension) and Rule 4(a)(5)(C) (which does) has divided appellate courts. Two circuits had deemed the limitation in Rule 4(a)(5)(C) a mandatory claims-processing rule, which means it must be followed but can be waived or forfeited such that there are circumstances where an appeal could be timely even if filed during an extension longer than the Rule countenances. Three circuits had deemed the limitation jurisdictional, which means they considered it an absolute bar to proceeding with an appeal filed after the outside limit of the rule, regardless of circumstances. In Ms. Hamer’s case, the Seventh Circuit joined the jurisdictional side of this split.

The Supreme Court clarified that the 30-day limitation on extensions in Rule 4(a)(5)(C) is a mandatory claims-processing rule, not a jurisdictional limit. The Court reiterated that limits prescribed by congressionally enacted statutes mark jurisdictional boundaries, whereas those prescribed by judicially crafted rules present mandatory claims-processing rules. Here, because the statute governing the timing of appeals—28 U.S.C. 2107—does not itself limit the length of a potential extension, the 30-day restriction in Rule 4(a)(5)(C) is not jurisdictional.

While 28 U.S.C. 2107 had, prior to 1991, limited extensions of the deadline to notice an appeal to 30 days, the Supreme Court refused to speculate that Congress’s deletion of that limit was inadvertent. See Hamer, slip op. at 7-8. And though a prior Supreme Court decision had stated that “the taking of an appeal within the prescribed time is ‘mandatory and jurisdictional,’” Bowles v. Russell, 551 U.S. 205, 207 (2009) (quoting Griggs v. Provident Consumer Discount Co., 459 U.S. 56, 61 (1982) (per curiam)), the Hamer Court explained that the word “jurisdictional” is now more carefully and precisely used. See Hamer, slip op. at 9-10.

What’s next? Ms. Hamer’s case goes back to the Seventh Circuit. And future appellate litigants and their attorneys should proceed cautiously, recognizing that the rule allowing an extension of up to thirty days to notice an appeal is a mandatory claims-processing rule, not a jurisdictional limitation.

Law clerk Laura Lamansky assisted with researching and writing this blog post.

Court of Appeals Decides Wis. Stat., Ch. 90, Applies Equally to Cities, Villages, and Towns

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Over 150 years ago, the Wisconsin legislature passed a law, now codified in Chapter 90 of the Wisconsin Statutes, to resolve conflicts over fences separating neighboring agricultural lands.  Chapter 90 requires fences partitioning farmland from neighboring properties. Chapter 90 also provides detailed requirements for what constitutes a sufficient partition fence and provides cost sharing and dispute-resolution procedures. Chapter 90 assigns towns to assist in resolving disputes between property owners regarding partition fences on land located within their borders.  Chapter 90 also references cities and villages, but it makes no similar assignment to such municipalities. The law therefore is ambiguous about whether cities and villages are obligated to resolve fence disputes.  

In White v. City of Watertown, No. 2016AP2259 (Oct. 12, 2017), the Wisconsin Court of Appeals resolved this ambiguity and clarified that Chapter 90 applies to cities, villages, and towns alike.

The Whites owned and farmed land in the City of Watertown on which they maintained a partition fence. The cost and maintenance of the fence resulted in a dispute between the Whites and their neighbors. Invoking the procedures of Chapter 90, the Whites asked the City to assist in resolving this dispute. When the City refused, the Whites filed suit, asking the circuit court to clarify that the City was legally obligated to help. The circuit court observed that Chapter 90 is ambiguous but held that Chapter 90 applies to cities and villages, the same as it does to towns.

The City appealed, and the Court of Appeals affirmed. The appellate court agreed with the circuit court that the text of Chapter 90 is ambiguous. On the one hand, the statute requires “fence viewers” to carry out specified governmental duties, which include resolving disputes between property owners. And the statutory definition of fence viewers includes town supervisors, city alderpersons, and village trustees. On the other hand, most of Chapter 90’s references to “fence viewers” include only “town fence viewers.” Further, additional provisions in Chapter 90 appear to contemplate administration and enforcement only by towns.

To resolve this ambiguity, the Court of Appeals looked to the Chapter’s legislative history. The Court found that, prior to 1875, the Chapter contained no references to cities or villages. However, in 1875 the legislature amended Chapter 90 to apply to cities, villages, and towns alike. In 1878, the legislature revised the Wisconsin Statutes. Without reason, most of the language added in the 1875 amendments—language clarifying that the Act applied to cities and villages, as well as to towns—was omitted from the 1878 revised publication. Concluding that the omission “must have been inadvertent,” the Court of Appeals held that, when farmland is in a city or village, that municipality must administer and enforce Chapter 90’s requirements just as a town would if the land were within the town’s boundaries. As a result, the Whites prevailed and the City of Watertown will have to assume Chapter 90 duties with respect to the Whites’ land.

The Court of Appeals in White clarified that cities, villages, and towns must now assume the duties of fence viewers under Chapter 90. The main duty for fence viewers under Chapter 90 is to resolve disputes between adjoining property owners with lands divided by partition fence. For example, under Wis. Stat. § 90.10, fence viewers can direct property owners to repair or rebuild partition fences. Further, under § 90.07, fence viewers, under certain circumstances, may locate the line upon which a partition fence between adjoining lands must be built.

Multi-Month Medical Leave Not A Reasonable Accommodation Under the ADA

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The Court of Appeals for the Seventh Circuit recently held in Severson v. Heartland Woodcraft, Inc., 2017 U.S. App. LEXIS 181197*, 872 F.3d 476 (7th Cir. 2017) that a leave for medical purposes of two months or more is not a reasonable accommodation under the federal Americans with Disabilities Act (ADA).  In so doing, however, the Court left open the possibility that shorter or intermittent leaves might be, under appropriate circumstances.    

In Severson, the plaintiff took the full 12-week allotment of medical leave under the federal Family and Medical Leave Act (FMLA) due to back pain.  During his leave, he scheduled back surgery for day his FMLA leave expired.  Severson told the employer that he would not be able to work for two-to-three months after the surgery and requested non-FMLA medical leave for the recovery time.  The employer denied the request, given that Severson would be unable to perform any part of his job for several months.    

The court held that the employer’s decision did not violate the ADA.  The ADA, the court explained, is an anti-discrimination statute, not a medical-leave entitlement.  Id. at *3.  According to the court, the ADA is designed to prevent discrimination against a “qualified” individual, defined as a person who, “with or without reasonable accommodation, can perform the essential functions of the employment position.”  Id.  Thus, protection under the ADA is “expressly limited to those measures that will enable the employee to work.  An employee who needs long-term medical leave cannot work and thus is not a ‘qualified individual’ under the ADA.”  Id. (citing Byrne v. Avon Prods., Inc., 328 F.3d 379, 381 (7th Cir. 2003)).  Based on these considerations, the court determined that Severson was not a qualified individual under the ADA because the requested accommodation—a leave of two-to-three months—would not allow him to perform the essential duties of his job and thus was not reasonable.   

Employer Takeaway

Severson provides definitive guidance to employers in the Seventh Circuit with respect to employee requests for medical leave for two or more months, but only if the leave is not mandated by a medical leave statute like the federal FMLA or any state law counterparts.  While Severson also suggests that even a leave of more than a couple of weeks may not be a reasonable accommodation, employers should still proceed with caution in responding to requests for leave of less than two months because the reasonableness of the leave will turn on the particular circumstances of each request.  Employers also should keep in mind that Severson does not permit employers to deny extended leave mandated by another statute.  In such cases, of course, employers must provide the leave whether or not it would be considered a reasonable accommodation under the ADA. 

For additional guidance or questions related to employers’ responsibilities under the ADA, contact Meg Vergeront at (608) 256-0226.    

U.S. District Court Enjoins Proposed Overtime Regulations

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In Nevada v. United States Department of Labor, the United States District Court for the Eastern District of Texas determined that the U.S. Department of Labor (DOL) overstepped its administrative authority in issuing Fair Labor Standards Act (FLSA) regulations relating to overtime pay. 218 F. Supp.3d 520 (E.D. Tex. 2017). DOL wrote the regulations in response to President Obama’s instruction to the Secretary of Labor to “modernize and streamline the existing overtime regulations….” The court’s decision is good news for employers:  the regulations, if fully implemented, would have dramatically increased the number of employees eligible for overtime pay. 

FLSA Background

The FLSA requires employers to pay employees one and one-half times the employee’s regular rate of pay for all hours worked above forty in a given work week. However, employers do not have to pay overtime to employees who hold positions that fall within a regulatory exemption.  With respect to the executive, administrative and professional exemption, prior to the regulation at issue in this case, positions were considered exempt only if an employee in the position performs specified duties and is paid a salary of at least $455 per week, or $23,660 annually. 

At Obama’s prompting, the DOL revised the federal overtime regulations.  Had they gone into effect, they would have drastically raised the threshold salary amount to $913 per week, or $47,476 annually.  These figures would be updated automatically every three years. 

The Court’s Decision

Twenty-one states and fifty-five business groups sued the DOL seeking to invalidate the final rule. The plaintiffs argued that the overtime regulations exceeded the scope of DOL’s delegated authority.  The court considered whether the DOL’s interpretation was based on a permissible construction of FLSA.  The court analyzed the statutory text, and the plain meaning of the words “executive,” “administrative,” “professional,” and “capacity.”  Based on this analysis, the court determined that Congress intended the exemption to apply to employees who perform “executive, administrative, or professional capacity” duties.

The court found that the final rule will “effectively eliminate the duties test…” and is thereby a “salary-level only test,” which does not align with Congress’s intent.  The court explained that a lower minimum salary-level “screen[s] out the obviously nonexempt employees, making an analysis of duties in such cases unnecessary.”  A higher minimum salary-level “makes an employee’s duties…irrelevant if the employee’s salary falls below the new minimum.”  The court believed this ignored Congress’s intention to consider employees’ duties. Based on this determination, the court held that the DOL’s final overtime rule was unlawful.

Effect of the Court’s Ruling

The court’s decision enjoins the DOL from implementing the Obama-era rule.  Furthermore, the Trump administration did not advocate for the increased salary test on appeal of the lower court’s decision.  Therefore, regardless of the outcome on appeal, the Obama-era overtime rule will not go into effect, at least not during the current administration.  On July 26, 2017, the DOL published a Request for Information to gather public comments to aid in revising the rule.

Wisconsin Supreme Court Sets Tight Standard of Proof for Conspiracy to Misappropriate Trade Secrets

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The Wisconsin Supreme Court recently clarified the evidentiary requirements for establishing a conspiracy to misappropriate trade secrets under Wis. Stat. § 134.90.  See North Highland Inc. v. Jefferson Machine & Tooling Inc. et al., 2017 WI 75, 898 N.W.2d 74 (2017).  In a narrow 4-3 decision written by Justice Ann Walsh Bradley, the Court concluded that such a claim may proceed to trial only if there is evidence establishing the defendant had direct knowledge of the misappropriation.

North Highland Inc. is a small manufacturing company that served as a vendor for Bay Plastics, a distributor of customized plastic parts.  Dwain Trewyn worked as a business generator for North Highland.  His duties included submitting bids for potential projects.  When Frederick Wells, Bay Plastics’ owner, decided to form his own manufacturing company, Jefferson Machine & Tool Inc., he approached Trewyn about joining the new venture.  Trewyn became a 25% owner of Jefferson, even as he continued to work at North Highland.

A dispute arose when Jefferson and North Highland submitted competing bids to manufacture stainless steel trolley assemblies for Tyson Foods Inc.  Trewyn submitted North Highland’s confidential bid for the project. Then, he submitted a slightly lower bid on behalf of Jefferson. Tyson awarded the contract to Jefferson, until North Highland threatened to sue and the deal fell apart.

North Highland sued Trewyn, Wells, Jefferson, and Bay Plastics, alleging, among other theories, that Wells and Trewyn had conspired to misappropriate North Highland’s trade secrets (namely, the amount of the Tyson bid).  After Trewyn filed for bankruptcy and settled North Highland’s claims against him, the circuit court granted Wells’ summary judgment motion and dismissed the claims against Wells.

On appeal, the Court of Appeals affirmed the dismissal of the claims against Wells. The court concluded that (1) North Highland had failed to set forth any facts establishing that Trewyn and Wells conspired to misappropriate North Highland’s trade secrets, and (2) North Highland had not established that the amount of its bid qualified as a trade secret under Wis. Stat. § 134.90(1)(c).  At North Highland’s request, the Wisconsin Supreme Court agreed to review the case.

Writing for the majority, Justice Ann Walsh Bradley affirmed the dismissal.  Like the lower courts, the Supreme Court determined that the evidentiary record did not support the allegation that Wells had conspired with Trewyn to misappropriate North Highland trade secrets allegedly protected by statute.  Id. ¶ 39.  While it was undisputed that Trewyn had formulated the Tyson bids for both North Highland and Jefferson, the Court was unwilling to permit a jury to say that meant that Wells himself must have known the amount of North Highland’s bid.  Id. ¶ 41.  The Court cited repeated deposition testimony from both Wells and Trewyn that (1) Wells was not aware Trewyn had submitted a Tyson bid on North Highland’s behalf, (2) Wells was not involved in formulating Jefferson’s bid, and (3) Wells had not created Jefferson to compete against North Highland.  Id. ¶¶ 11-15, 30-33.

In the face of this “unrebutted” deposition testimony, the Court concluded that “[t]here are simply no facts or reasonable inferences derived from the facts to support such an allegation [of trade secret misappropriation against Wells].”  Id. ¶ 42.  Having found no evidence of misappropriation, the Court had no need to decide whether the amount of a confidential project bid qualifies as a “trade secret” under Wis. Stat. §134.90(1)(c).

In a detailed dissent, Chief Justice Roggensack noted that § 134.90(2) extends liability to anyone who “knows or had reason to know” about misappropriation, such that circumstantial evidence of an actor’s knowledge should be enough to prove a violation.  Id. ¶¶ 109-110 & n.38.  Applying this standard, the dissent referenced additional deposition testimony from Wells that (1) Wells worked with Trewyn to develop Jefferson’s bid, (2) Wells knew Trewyn continued to work at North Highland during the Tyson bidding process, (3) Wells recognized that North Highland and Jefferson were competitors, and (4) Wells was aware that Trewyn’s employment contract with North Highland did not contain  a non-compete provision.  Id. ¶¶ 56-61, 109.  Given this additional testimony, the dissent argued that the evidentiary record presented factual issues appropriate for a jury to resolve.

In the wake of North Highland, entities considering suit against former employees and/or competitors for violations of Wis. Stat. § 134.90 should evaluate what admissible evidence ties their competitors’ conduct to the alleged misappropriation.  The majority was unwilling to allow North Highland to extend liability beyond its own employee (Trewyn), who clearly was the primary actor, despite Wells’ presumed awareness of Trewyn’s business conflicts.  Accordingly, before undertaking expensive litigation under Wisconsin trade-secrets law, companies should be prepared to establish a clear, strong, direct link between their targeted defendants and the alleged misappropriation.

Management Policies Generally Will Not Abrogate Employment-At-Will

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The Wisconsin Court of Appeals recently reversed a circuit court decision that awarded a physician-employee $2.2 million against his employer, Dean Health Systems (Dean). Bukstein, M.D. v. Dean Health Systems, Inc., No. 2016AP920 (Wis. Ct. App. July 20, 2017) (recommended for publication). The dispute revolved around whether Bukstein was an employee at-will who Dean could terminate for any reason, with or without cause, without being subject to a breach-of-employment contract claim.

Background

Bukstein initially signed an employment agreement with Dean that confirmed that Buckstein was an at-will employee.  After an investigation into allegations of inappropriate touching of patients, Dean fired Buckstein “without cause,” pursuant to the at-will provision in the initial agreement.  Bukstein sued, arguing that one of Dean’s management policies modified his at-will employment status, and afforded him greater employment protection from termination. Buckstein argued that the policy “‘change[d] the employment relationship by creating a ‘contract separate from or supplemental to the [employment agreement].’”  The decision did not identify relevant content of the policy at issue.    

Court’s Decision

The court of appeals rejected Bukstein’s argument in one fell swoop, stating that “[t]he problem with Bukstein’s reliance on the [management] policy is that, under controlling case law, the policy does not modify Dean’s right to terminate Bukstein under the at-will provision in the employment contract.”  The court explained that a policy such as the one in this case “does not modify or take precedence over an at-will employment agreement” unless the “only when” rule applies.

The “only when” rule provides that policies “alter an established at-will employment relationship ‘only when’ the policy ‘contains express provisions from which it can reasonably be inferred that the parties intended to bind each other to a different employment relationship’ than the established at-will relationship.’” The court stated that Bukstein failed to point to any language in Dean’s management policy that could support a reasonable inference that the parties intended to change their at-will employment relationship.  Therefore, the court held that Dean did not breach its contract with Bukstein when it relied on the at-will provision in the employment agreement to terminate Bukstein “without cause.”

Employer Take-Away

Employers that issue policies governing the employment relationship, such as policies setting the duration of employment or conditions upon which it may terminate employees, should carefully examine the policy language to determine whether that language could trigger the “only when” rule. A decision from the Wisconsin Supreme Court, Ferraro v. Koelsch, 124 Wis.2d 154, 163-65, 368 N.W.2d 666 (1985), gives a few examples of the kinds of polices that might trigger the “only when” rule.  Such policies include those that (1) govern employees in exchange for “continued employment,” (2) establish a layoff procedure based on seniority, and (3) provide that “discharge [will] only be for ‘just cause.’”

Associate Olivia Pietrantoni assisted in researching and writing this post.

The Not-So-Scenic Pit: Court Reaffirms Limited Local Control Over Certain Solid Waste Facilities

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The issue of local control is once again front and center in a recent Wisconsin Court of Appeals decision, Scenic Pit LLC v. Village of Richfield, No. 2015AP2291 (June 28, 2017) (recommended for publication).

Scenic Pit LLC sought to open a clean fill solid waste facility in the Village of Richfield. Such facilities accept disposal of only certain low hazard wastes. The Village took the position that Scenic needed to obtain several local approvals, including for rezoning the property, for a conditional use permit, and for a construction storm water and erosion control permit. Id., ¶4. Scenic applied for construction permits from the Village, but it did not attempt to acquire the storm water and erosion control permit or the rezoning of the property. Id., ¶4. The Village denied Scenic’s application for construction permits. Id.

Scenic also applied for and obtained a Wisconsin Pollution Discharge Elimination System (WPDES) general permit from the Wisconsin Department of Natural Resources (DNR) for construction site storm water runoff and erosion control. Id.

When the Village denied the construction permits, Scenic sued seeking a declaratory judgment that it was not required to comply with local approvals and an injunction ending the Village’s interference with its proposed plan. Id., ¶5. Both Scenic and the Village moved for summary judgment. Id.

The circuit court granted summary judgment to the Village, on the ground that under the authority of Willow Creek Ranch, LLC v. Town of Shelby, 2000 WI 56, 235 Wis. 2d 409, 611 N.W.2d 693, Scenic was required to comply with all local ordinances unless “‘state and local interests are diametrically opposed,’” which the court found they were not. Id.

On appeal, Scenic argued that the DNR had exempted clean fill facilities from needing to obtain the kind of local approvals the Village was requiring. The court of appeals agreed with Scenic. The court explained that the legislature has designated the regulation of solid waste facilities as a matter of statewide concern. Id., ¶8. While a municipality may regulate matters of statewide concern, it may only do so as long as local ordinances do not conflict with state law. Id.

The court relied heavily on DeRosso Landfill Co. v. City of Oak Creek, 200 Wis. 2d 642, 547 N.W.2d 770 (Wis. 1996), which it explained was directly on point. The DeRosso court had previously determined that the statutory and regulatory scheme allowed DNR to exempt low hazard waste facilities from local requirements that applied to most other waste facilities and that this scheme amounted to an express withdrawal of municipal power to require local approvals. Id., ¶11. 

The Village attempted to distinguish DeRosso on the ground that the precedent does not apply to local zoning. That, the Village argued, placed its dispute with Scenic beyond the scope of DeRosso decision. Id., ¶14-19. The court disagreed, explaining that the precedent on which the Village was relying, Willow Creek Ranch, LLC v. Town of Shelby, 2000 WI 56, 235 Wis. 2d 409, 611 N.W.2d 693, was inapposite and simply did not address the issue raised here, nor did it conflict with the rationale in DeRosso. Id., ¶¶14-19.

After holding that DeRosso controlled and that any local approvals required to construct Scenic’s facility were preempted, the court went on to examine whether the Village’s zoning ordinance and construction storm water and erosion control regulations were local approvals. Id., ¶19. The court concluded that they were, based on the very broad definition of “local approval” found at Wis. Stat. § 289.33(3)(d). Id., ¶29.

The takeaway from this case is that municipalities have limited control over the siting of certain solid waste facilities such as low-hazard clean fill facilities. However, the court was careful to point out that DNR regulations still control siting of such facilities. As the court explained, “[l]eaving the regulation of clean fill facilities to DNR may or may not be good policy, but it is what the legislature and DNR have done through statute and administrative rule (as interpreted by the supreme court.)” Id., ¶24.

WI Courts Continue To Limit Criminal Expungement, Even as Legislature Considers Expanding Scope

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In May, Representatives Steffer (R-Howard) and Hoyke (D-Milwaukee) introduced 2017 AB 331 in the Wisconsin Assembly. The proposed legislation would change current Wisconsin law to make expungement available to those previously convicted of a crime or who were ineligible for expungement at the time their case was resolved, and it would expand the number of defendants who can seek expungement. However, this legislative proposal is at odds with the current trend in Wisconsin courts interpreting existing expunction law.

Wisconsin’s current expungement statute, Wis. Stat. § 973.015, allows courts, at the time of sentencing, to order a defendant’s conviction to be expunged after “successful completion” of a sentence, if the defendant is under age twenty-five at the time of conviction and the offense has a maximum period of imprisonment of six years or less. This statute gives the court a chance to “shield youthful offenders from some of the harsh consequences of criminal convictions.” State v. Matasek, 2014 WI 27, ¶42.

The combination of Wisconsin’s Open Records Law and the availability of court records online through the Consolidated Court Automation Program (CCAP) means that anyone with Internet access—read: nearly everyone—can easily obtain criminal history and case history from any Wisconsin court. Without expungement, convictions (whether of the original charge or a lesser, amended charge), charges that do not lead to convictions, and dismissed charges are all viewable by prospective employers, admissions officers, landlords, in-laws, etc. This access has practical consequences. For example, the American Bar Association has identified 38,000 statutes that impose collateral consequences for those with criminal convictions—of those, nearly half negatively impact employment opportunities. State v. Ozuna, 2017 WI 64, ¶ 39 (A.W. Bradley, J., dissenting).

While the purpose and scope of Wis. Stat. § 973.015 seem straightforward at first glance, the law contains ambiguities that courts have interpreted to limit access to expungement. Recent court cases have featured debates over what “expunge” and “successful completion” mean within the statutory context. The judicial trend has been to answer these questions in favor of narrowing the availability and scope of expungement under Wisconsin law.

The committee notes to Wis. Stat. § 973.015 define “expunge” as “to strike or obliterate from the record all references to the defendant’s name and identity.” Comm. Note to Wis. Stat. § 973.015(3) (citing 67 Atty. Gen. 301). But recent decisions have limited the efficacy of expungement in practice. Yes, the criminal record is sealed, with access barred absent a court order—but the police and some other governmental entities can still view the arrest. The court records still exist despite being removed from CCAP and can still be accessed by some individuals. Additionally, the record is still accessible in the Wisconsin Department of Justice’s Crime Information Bureau (CIB) database and the Criminal Justice Information Services Division of the federal Department of Justice’s National Crime Information Center (NCIC) database.

Moreover, under State v. Leitner, 2002 WI 77, courts can use information from judicial records, Department of Corrections files, and police reports relating to a prior, expunged conviction to formulate the sentence for a subsequent conviction, even though the record of the earlier conviction was “obliterate[d].” The Leitner Court clarified that, while § 973.015 bars formal consideration of a prior, expunged conviction, it does not otherwise “shield a misdemeanant from all of the future consequences of the facts underlying a[n expunged] record of a conviction,” so long as “those facts are not obtained from expunged court records.” Leitner, 2002 WI 77,38.

In one recent decision, the Supreme Court expanded even further the acceptable use at sentencing of underlying facts from an expunged record. In State v. Allen, 2017 WI 7 (Feb. 9, 2017), the criminal background check contained in the Pre-Sentence Investigation Report detailed the incident behind the defendant’s ostensibly obliterated record: “This incident involved a fight with another boy at high school and he was charged because the other boy lost a tooth in the fight.” Id., ¶10. Although the report acknowledged that the record was “officially expunged,” the circuit court sentenced more harshly based on the fact of prior offense, noting that Allen “had an opportunity to learn something from that [occasion].” Id., ¶12. The Supreme Court affirmed the circuit court, holding that, even where a record is expunged, many (if not all) of the incriminatory details are still available for a sentencing court’s review and may factor into the court’s subsequent sentencing decision.

In another recent decision, the Wisconsin Supreme Court further limited the availability of expungement. State v. Ozuna, 2017 WI 64, addressed another ambiguity in Wis. Stat. § 973.015: where expungement automatically occurs upon the successful completion of a probation sentence, who decides what “successful” means? Under the terms of his plea agreement, Ozuna’s convictions for criminal damage to property and disorderly conduct were to be expunged once he successfully completed probation. At the end of Ozuna’s probation, the DOC filed a “Verification of Satisfaction of Probation Conditions for Expungement” with the circuit court, indicating that Ozuna had “successfully completed” his term of probation. Notwithstanding the DOC’s determination, the circuit court disregarded the DOC form and denied Ozuna’s expungement. The circuit court based its decision on Ozuna’s receipt of an underage drinking citation—in violation of a no-alcohol probation rule.

The question on appeal was narrow: had Ozuna successfully completed probation, entitling him to expungement? Ozuna’s brief to the Supreme Court pointed out that, “upon successful completion of the sentence the detaining or probationary authority shall issue a certificate of discharge which shall be forwarded to the court of record and which shall have the effect of expunging the record.” Under the statute, he argued, the expungement process is ‘self-executing’ once the probation officer determines the sentence is complete.

Ozuna relied on State v. Hemp, 2014 WI 129, and State v. Matasek, 2014 WI 27. Under Hemp, a probation officer was given discretion to determine whether or not probation had been successfully completed. Moreover, once the officer determined the sentence was completed, expungement would be automatic, or self-executing. Under Matasek, the decision of expungement should be made at the sentencing stage, rather than after completion of the sentence. In other words, the circuit court’s role is before the sentence is served, and the probation officer’s role is after. In response, the State claimed that Ozuna had not successfully completed his probation sentence, differenting him from the defendants in Hemp and Matasek, who had done so.

The Supreme Court sided with the State. Its reasoning was simple. The statute says a record can be expunged “upon successful completion” of the sentence—here, probation. Successfully completing his probation required Ozuna to follow all of its requirements. Because Ozuna did not follow the no-drinking conditions of his probation, he did not successfully complete his probation. It did not matter that the DOC indicated otherwise. Nor did it matter that expungement is typically self-executing. What controlled the outcome of the case was that “Ozuna did not meet the criteria for expungement, because he did not satisfy the conditions of his probation.” 2017 WI 64, ¶19.

While the courts have consistently limited expungement, the legislature continues to consider changes in the opposite direction. A series of failed legislative efforts last session would have expanded the expungement statute. AB 1005 would have allowed defendants to petition for expungement of records related to a criminal prosecution after either acquittal or dismissal of charges. AB 1004 would have required expungement of records related to a criminal prosecution where the defendant was found not guilty or the conviction was reversed on appeal. And AB 1008 would have allowed courts to consider expungement after a defendant served their sentence, rather than only at the sentencing hearing.

In light of these failed measures, the prospects for 2017 AB 331 remain unclear. Unlike last session’s proposals, AB 331 has bipartisan sponsorship, but that does not mean it will gain sufficient support to become law. In the meantime, while the expungement statute appears straightforward, defendants should be cautious, bearing in mind judicially imposed limitations.

Law clerk Charles Ureña assisted in researching and writing this post.

Discharged Police Officer Has No Constitutional Entitlement to Pay During Pendency of His Appeal

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As we reported in November 2016, the Wisconsin Court of Appeals upheld a decision by the Milwaukee City Board of Fire and Police Commissioners (“Board”) to terminate the employment of Milwaukee Police Department (“MPD”) Officer Daniel Vidmar for falsifying a document to take possession of an unclaimed dirt bike from MPD inventory. While Officer Vidmar did not seek Wisconsin Supreme Court review of that decision, the court of appeals’ decision ended only one of Officer Vidmar’s legal challenges arising out his termination.

In a parallel federal case asserting due process and state law wage claims, the U.S. Court of Appeals for the Seventh Circuit recently slammed the door on another of Vidmar’s related challenges to his termination. Milwaukee Police Ass’n v. Flynn, No. 16-3743, 2017 WL 2962017 (7th Cir. July 12, 2017). The federal claims advanced by Vidmar and other discharged officers alleged they were denied due process when the City of Milwaukee terminated their pay and benefits upon discharge, even though they had not yet exhausted their right to challenge their terminations by appeals to the Board.

The Seventh Circuit concluded that the discharged officers had no entitlement to pay during the pendency of their appeals. As the court framed its holding, under Wisconsin law the former officers had no “property interest” in their employment once they were discharged for cause. 2017 WL 2962017 at *7. The court rejected the officers’ assertion that the chief’s “authority is limited to suspending a member’s police powers pending a trial before the Board,” concluding that the argument was “directly contradicted by the language of the statute.” Id. at *4. Instead, the court construed the statute to provide that the chief’s decision to terminate the officers was a final employment action, subject to the officers’ right to appeal the decision to the Board. As the court described it, the statute clearly provides that the officers’ property interest in their employment “is lost at the first juncture,” that is, with the chief’s decision to terminate for cause, while the discharged officer had the “opportunity to reclaim his property interest in employment on appeal after a trial.” Id. at *5.

Although not cited by the court, Wis. Stat. § 62.50(22) would have entitled the discharged officers to back pay if they had successfully challenged their discharge. This access to back pay plainly factors into the court’s statement about the officers’ opportunity to “reclaim” their property interests. Additionally, as the court noted, under Wis. Stat. § 62.50(18) an officer suspended for a period of time without pay is entitled to continue to be paid until exhaustion of the appeal. However, this provision does not apply to discharged officers.

The Seventh Circuit’s decision addresses Wis. Stat. § 62.50, which applies only to the City of Milwaukee Board. However, the statutory language of Wis. Stat. § 62.13, which governs all other municipal Boards of Police and Fire Commissioners, appears indistinguishable. Wis. Stat. § 62.13(5)(h), just like Wis. Stat. § 62.50(18), provides that an officer may not be deprived of compensation while suspended pending disposition of charges but does not address discharged officers. The latter are entitled to have all lost pay restored only if the charges are not sustained. Wis. Stat. § 62.13(5)(e). Therefore, the Seventh Circuit’s decision should not be viewed as peculiar to the City of Milwaukee.

Notably, the Seventh Circuit decision does not mark the end of Vidmar’s collateral attacks on his discharge. Presently pending before the Wisconsin Court of Appeals is Milwaukee Police Association v. City of Milwaukee, No. 2016AP1573, an appeal by Vidmar and his collective bargaining unit from a judgment dismissing their challenge to the Board’s compliance with political affiliation and training requirements set by Wis. Stat. § 62.50(1)(h) and Milwaukee City Ordinance § 314. Among other things, in that matter Vidmar seeks judgment declaring that his discharge was “unlawful” because the City’s appointment of Board members did not meet these requirements. So the Vidmar discharge matter has not yet officially reached the end of the road.

If you have any questions about the PFC disciplinary process, contact a member of Stafford Rosenbaum LLP’s Government Law Team members.

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